The Coca-Cola Company (KO – Free The Coca-Cola Company Stock Report) continues to demonstrate healthy top-line momentum. Most notably, organic growth clocked in at 7% for the December quarter and 6% for the full year. This progress, which was evident in both sparkling and still beverages, helped the company to achieve its largest value share gains in nearly a decade. And management emphasized that it was able to make these positive strides, including in the flagship Coca-Cola brand, even as consumers look to reduce caloric intake by shifting away from full-sugar beverages. Continued strong gains from the Coca-Cola Zero Sugar brand (double-digit growth), a shift to smaller packaging options, and the roll out of newer brands, such as Coca-Cola Plus Coffee and innocent (juices and smoothies) to additional markets, were among the key factors driving this performance.
Meanwhile, earnings for the fourth quarter finished at $0.44 a share, a penny above the prior-year period and our estimate of $0.43. Exchange rates remained a headwind, clipping 7% off of comparable operating income, which would have otherwise advanced 23%. Aside from the aforementioned organic revenue growth, results also benefited from productivity initiatives and benefits from acquisitions. At the regional level, Latin America made the biggest strides, as the timing of shipments in Brazil and favorable operating leverage across the region helped to lift comparable operating income nearly 50%. Elsewhere, North America and Asia Pacific posted gains of 9% and 5%, respectively, while the EMEA region (Europe, Middle East & Africa) slid 5%, due largely to Brexit-related reductions in bottler inventory.
Looking ahead, the company provided generally solid guidance for 2020. Management is targeting organic revenue growth of 5%, a shade below the 6% delivered for the 2019. Meanwhile, comparable currency neutral operating income looks set to advance 8%, though this will be partially offset by a 2%-3% headwind from foreign currency. And earnings, which were stuck in neutral for the most part during 2019, ought to climb 7% in the new year, to roughly $2.25.
Overall, investors have been pleased with the company's progress since early 2019, and December-quarter results did nothing to disrupt this sentiment. Indeed, the share price climbed past $58 (on a split-adjusted basis) for the first time on the news. As it stands, KO stock looks to be a solid selection for conservative accounts, given its top rank for Safety (1, Highest), minimal price volatility, and above-average dividend yield. Still, buy-and-hold investors should note that this equity's healthy share-price gains of late leave it with limited total return potential for the three to five years ahead.
About the Company: The Coca-Cola Company is the world's leading marketer of ready-to-serve, nonalcoholic beverages. On any given day, 1.7 billion individual servings of the company's brands are consumed by people around the globe. The Atlanta-based company currently has more than 500 wholly owned and licensed brands, including 15 that generate $1 billion or more in annual sales.
– Robert M. Greene
